FTC SAYS MERGER WOULD CONSTITUTE COUNTY MONOPOLY
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November 14, 1994 12:00 AM

FTC SAYS MERGER WOULD CONSTITUTE COUNTY MONOPOLY

Mary Chris Jaklevic
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    The Federal Trade Commission announced last week it will challenge a merger of two Port Huron, Mich., hospitals that it said would create a virtual monopoly of acute-care inpatient services in St. Clair County, 60 miles northeast of Detroit.

    The city's only hospitals, Port Huron Hospital and Mercy Hospital, in January signed a memorandum of understanding to merge.

    The hospitals plan to fight. Donald Fletcher, president of Port Huron Hospital, said local employers, politicians and community members back the deal.

    Port Huron Hospital, with 264 licensed beds, is owned by Blue Water Health Services Corp., a not-for-profit corporation. Mercy Hospital, with 119 licensed beds, is owned by Mercy Health Services in Farmington Hills, Mich.

    The assets of both hospitals, valued at about $100 million, would be acquired by Local Health System, a not-for-profit corporation created by Mercy Health Services and St. John Health System of Detroit. St. John owns 68-bed River District Hospital in nearby St. Clair, Mich.

    The FTC argues the merger would give St. John an ownership stake in the county's three "financially viable" hospitals. The three hospitals control 98% of inpatient admissions and 93% of licensed beds in the county, according to data provided by the hospitals.

    A fourth hospital, Yale Community, has 35 licensed beds and is primarily an outpatient center, the FTC said.

    Mr. Fletcher acknowledged the systems "will have an ownership position, but the community will, too," because 14 of 19 board members of the new system would be community members.

    He said the merger will save $53 million over five years while fostering regional competition with hospitals in Mount Clemens, Mich., and other communities. He said 34% of county residents travel outside the county for inpatient care.

    "Our response is that we have two hospitals in an area in which there should only be one," Mr. Fletcher said.

    The FTC voted 3-1 to challenge the deal. It said a request for a court order to temporarily block the merger would be filed in federal District Court in Detroit, probably this week. If the court grants the FTC request, the commission will have 20 days to show how the proposed merger would violate federal antitrust laws before an administrative hearing begins.

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